"Chicago Tonight” has learned that Gov. Bruce Rauner and top Republican leaders are planning to introduce legislation aimed at an emergency financial takeover of the city of Chicago and Chicago Public Schools. This comes in light of an imminent $500 million shortfall within the Chicago Public Schools system.

The Republican leaders are set to announce the legislation tomorrow, but Paris Schutz has the exclusive information tonight.

Sources tell “Chicago Tonight” that the governor and his top two legislative leaders – Senate minority leader Christine Radogno and House minority leader Jim Durkin will file a package of legislation Wednesday that would allow for an emergency financial oversight board appointed by the state to take over the financially strapped school district. Other legislation would allow for emergency financial oversight of the credit-beleaguered city of Chicago.

Legislation would also allow for CPS and the city of Chicago to declare bankruptcy – something by law both cannot currently do.

We’re also told that the legislation would call for an elected Chicago Public Schools board once the financial situation is remediated. This, in light of the fact that CPS has set now as a deadline to receive $500 million in relief from the state or else lay off thousands of employees, including teachers.

Thanks for the continued source of info. I'm really hoping one of these days to wake up and actually have a material change/improvement to Chicago or state Gov't. Seems it's more of the same like when Quinn was in office.

Hopefully this move by Rauner starts a real domino effect for change. I'm sure it won't be pretty for many and for some time, but it's what the city needs.

My belief the past few years was that the 6 year bull run was helping pensions stay afloat, even if they remained as unfunded as they were, and one driver for change would be if the market came crashing down again by say 20% or more. We're in that midst now, so maybe this actually forces change.

Though not sure how large swings in the short-medium term impact pension valuations.

Chicago schools are borrowing to pay mounting debt bills and fund capital projects as the district’s liquidity deteriorates and its credit rating tumbles.
The Chicago Board of Education will sell $875 million of bonds on Jan. 27, according to Bloomberg data from J.P. Morgan, an underwriter on the deal. The deal is made up of $796 million of tax-exempt securities and $79 million of taxable debt, according to bond documents. The proceeds will cover capital projects, convert variable rate debt to fixed, fund swap termination payments and pay debt-service bills, bond documents show.

Jan 15 Standard & Poor's on Friday dropped the credit rating for the financially struggling Chicago Board of Education deeper into "junk" ahead of the school district's $875 million bond sale slated for later this month.

S&P cut the rating two notches to B-plus, while warning it could fall even further if the nation's third-largest school district fails to beef up cash flow to cover costs. (Reporting By Karen Pierog; Editing by Chris Reese)

New Study: Chicago has worst unfunded pension liability as a percentage of revenue among major cities – WP Original

A new study by the Center for State and Local Government Excellence looks at city unfunded pension liabilities under new governmental accounting standards. Some cities, unlike Chicago, participate in state-wide pension “cost-sharing” plans. The new standards require each city to include its shared liability in such plans, which increases their reported liability. This new study reflects those changes and measures unfunded liability as a percentage of each city’s revenue.

Despite those negative adjustments for other cities, Chicago is worst of 173 cities measured. Its unfunded pension liabilities are 359% of its revenues The 173-city average is 86%. Below, from the study, are the 20 worst of the 173 cities.

Republican legislative leaders are planning to propose a bill Wednesday that would allow a state-appointed board to take over the financially troubled Chicago Public School system and pave the way for it to declare bankruptcy, sources told the Chicago Sun-Times.

It’s a solution championed by Gov. Bruce Rauner — and rejected out of hand by Mayor Rahm Emanuel.

Jan 19 The Chicago Board of Education's credit rating sank deeper into "junk" on Tuesday with a Fitch Ratings downgrade to B-plus with a negative outlook from a previous rating of BB-plus.

"The downgrade reflects the limited progress Chicago Public Schools (CPS) has made in addressing a structural budget gap approximating 20 percent of spending for the current fiscal year," the credit rating agency said in a statement

Fitch's action followed a similar move on Friday by Standard & Poor's, which cut the rating for the financially struggling district two notches to B-plus.

In its rating report, Fitch said CPS faces a "relatively inflexible expenditure profile," an extremely limited independent ability to raise revenue and will likely deplete its reserves by the end of fiscal 2017.

The nation's third-largest public school system plans to sell $875 million of general obligation bonds next week. A recently posted online investor presentation for the bond sale indicated that CPS continues to push for more funding from the state of Illinois and aims to eliminate a more than $1 billion structural budget deficit by fiscal 2018.

With a financial fix for CPS entangled in the state's budget impasse, school officials said they would take cost-cutting action and rely on short-term borrowing if there is no solution by the time fiscal 2016 ends. Republican leaders of the Democrat-controlled state legislature plan to unveil legislation on Wednesday related to the district's fiscal crisis.

CHICAGO, Jan 27 (Reuters) - Facing hefty yields, the financially ailing Chicago Public Schools (CPS) postponed Wednesday's planned $875 million bond sale and will evaluate the timing on a day-to-day basis, a school official said.

Ron DeNard, senior vice president of finance, said the delay was recommended by the district's financial advisers.

"The situation is dynamic, and giving investors more time will be of benefit to CPS," he said in a statement.

The nation's third-largest public school system is struggling with a structural budget deficit of at least $1 billion. Its fiscal woes led Illinois Governor Bruce Rauner and Republican lawmakers last week to push for a state takeover and potential bankruptcy for CPS - moves that were quickly shot down by Chicago Mayor Rahm Emanuel, who controls the school system, and leaders of the Democratic-controlled legislature.

A pre-pricing marketing scale circulated by underwriters on Tuesday for the "junk"-rated general obligation bonds showed yields topping out at 7.75 percent with coupons of 7.25 percent for bonds due in 2041 and 7 percent for bonds due in 2044. That yield indicated a so-called credit spread over Municipal Market Data's benchmark triple-A yield scale of as much as 506 basis points.

That spread was wider than the 464 basis-point spread the school system's 19-year bonds were fetching in secondary market trading last week.

In the district's $275.6 million GO bond sale last April, the spread for 20-year bonds was only 285 basis points.

Chicago’s troubled public school system on Wednesday had to slash the size of one of the biggest "junk" bond offerings the municipal market has seen in years and agree to pay interest costs rivaling Puerto Rico’s in order to lure investors into the deal.

The Chicago Board of Education managed to sell only $725 million of an originally planned $795.5 million of tax-exempt bonds, and yields on the deal topped out at 8.5 percent, a massive premium relative to higher-rated debt sold in the U.S. municipal bond market and a clear indication of investors’ view of the depths of the district’s fiscal woes.

Wednesday’s sale came a week after the school system had to pull the deal in its first attempt at an offering amid worry by investors that the district could end up in bankruptcy.

The nation's third-largest public school system has become dependent on borrowing to bolster its budget, which is sinking under escalating pension payments, despite credit ratings that have dropped into the "junk" level.

The 8.5 percent yield for bonds due in 2044 with a 7 percent coupon was slightly below the 8.727 yield for 21-year bonds in the municipal market's last big junk bond sale - a $3.5 billion Puerto Rico issue in March 2014.